Nucor Corp. v. Emp'rs Ins. Co. of Wausau

• Decision Date: 27 September 2013
• Docket Number: No. CV–12–678–PHX–SMM.,CV–12–678–PHX–SMM.
• Citation: 975 F.Supp.2d 1048
• Parties: NUCOR CORPORATION, Plaintiff, v. EMPLOYERS INSURANCE COMPANY OF WAUSAU, Defendant. Employers Insurance Company of Wausau, Counter-claimant, v. Nucor Corporation, Hartford Accident & Indemnity Company, and Travelers Casualty & Surety Company, Counter-defendants.
• Court: U.S. District Court — District of Arizona

975 F.Supp.2d 1048

NUCOR CORPORATION, Plaintiff,

v.EMPLOYERS INSURANCE COMPANY OF WAUSAU, Defendant.

Employers Insurance Company of Wausau, Counter-claimant,

v.Nucor Corporation, Hartford Accident & Indemnity Company, and Travelers Casualty & Surety Company, Counter-defendants.

No. CV–12–678–PHX–SMM.

United States District Court, D. Arizona.

Sept. 27, 2013.

Christopher L. Callahan, Fennemore Craig PC, Corey Israel Richter, Thomas M. Klein, William Francis Auther, Bowman & Brooke LLP, Julie Kristin Moen, Myles Patrick Hassett, Hassett Law Firm PLC, Phoenix, AZ, Craig Christopher Crockett, Scott Phillip Devries, Yelitza V. Dunham, Winston & Strawn LLP, David C. Capell, Gordon & Rees LLP, San Francisco, CA, for Plaintiff and Counter Defendant.

Allan S. Cohen, James E. Fitzgerald, Stroock & Stroock & Lavan LLP, Los Angeles, CA, Bryan Barber, Barber Law Group PC, San Francisco, CA, for Defendant and Counter Claimant.

MEMORANDUM OF DECISION AND ORDER

STEPHEN M. McNAMEE, Senior District Judge.

Before the Court are several related motions:

(1) Counter-defendant Travelers Casualty and Surety Company's Motion for Summary Judgment Re: Equitable Contribution (Doc. 80);

(2) Defendant/Counter-claimant Employers Insurance Company of Wausau's Motion for Partial Summary Judgment (Doc. 83);

(3) Counter-defendant Hartford Accident and Indemnity Company's Motion for Summary Judgment Re: Equitable Contribution (Doc. 85);

(4) Plaintiff/Counter-defendant Nucor Corporation's Cross Motion for Partial Summary Judgment (Doc. 124); and (5) Defendant/Counter-claimant Employers Insurance Company of Wausau's Motion to Strike (Doc. 125).

The motions are fully briefed. (Docs. 115, 118, 120, 127, 129, 132, 135, 136.) After considering the parties' briefing, and having determined that oral argument is unnecessary,¹ the Court issues the following ruling.

BACKGROUND

This insurance coverage dispute arose from a federal environmental liability lawsuit filed against Plaintiff/Counter-defendant Nucor Corporation (“Nucor”). In 2010, the Roosevelt Irrigation District (“RID”) filed suit against Nucor alleging that Nucor and dozens of other potentially responsible parties (“PRPs”) are responsible for releasing pollutants into Phoenix groundwater from the 1960s to the 1980s, resulting in contamination to wells owned and operated by RID. The underlying suit (hereafter referred to as the “RID action” or “RID suit”) seeks recovery of the costs associated with remediation of the groundwater contamination and damage to RID's real property.

A. Previous related litigation against Nucor.

For slightly over four years in the 1960s, Nucor owned and operated a manufacturing facility located on West Osborn Road in Phoenix, Arizona (hereafter “the Site” or “the WOR facility”), where it manufactured electronic components. (Doc. 1–1 at 2–3.) As part of its manufacturing process, Nucor used a solvent called trichloroethylene (“TCE”) to clean and degrease parts, tools, and machines. ( Id. at 3.) During the 1980s, TCE was discovered in the groundwater in the west-central area of Phoenix. ( Id.) As a result, Nucor has been sued in four separate lawsuits, including most recently the RID action. ( Id.) The four lawsuits are:

(1) An enforcement action brought by the Arizona Department of Environmental Quality (“ADEQ”);

(2) the Baker v. Motorola, et al., class action lawsuit (hereafter “ Baker ”) alleging property damage and medical surveillance claims;

(3) the consolidated lawsuit Lofgren v. Motorola, et al. (hereafter “ Lofgren ”), which consisted of individuals alleging personal injury; and

(4) the RID action.

( Id.) Nucor retained the law firm of Fennemore Craig to defend it in connection with all four lawsuits. ( Id. ¶ 16.)

Defendant Employers Insurance Company of Wausau (hereafter “Wausau”) issued four primary liability insurance policies to Nucor for the period from January 1, 1968 to January 1, 1972. (Doc. 84 ¶ 1.) Each of the Wausau policies at issue in this case included the following provision:

[T]he company [Wausau] shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even Many of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company's liability has been exhausted by payment of judgments or settlements.

( Id.)

Defendant Travelers Casualty & Surety Company (hereafter “Travelers”) issued five primary liability insurance policies to Nucor for the period from January 1, 1961 to January 1, 1966, and ten primary liability insurance policies for the period from January 1, 1975 to January 1, 1985. ( Id. ¶ 2.) Defendant Hartford Accident and Indemnity Company (hereafter “Hartford”) issued three primary liability insurance policies to Nucor for the period from January 1, 1972 to January 1, 1975. ( Id. ¶ 3.)

In 1997, Nucor filed a coverage action in Maricopa County Superior Court against insurers who provided liability insurance to Nucor in the 1960s to 1980s (hereafter referred to as “ Nucor I ”). (Doc. 84 ¶ 25.) In Nucor I, which was litigated over the course of 13 years, Nucor argued that the environmental claims arising out of the alleged contamination at the WOR facility involved a continuous trigger of coverage and thus involved their insurers from 1961 to 1984. ( Id.) The state court issued final judgments in Nucor I in 2010; the judgments were subsequently appealed to the Arizona Court of Appeals, which issued a published opinion and an unpublished memorandum decision on November 23, 2010. ( Id.) Nucor filed a petition for review with the Arizona Supreme Court as to two rulings of the appellate court, but neither of the issues Nucor appealed are relevant to the issues presented by the motions currently before this Court. ( Id.)

One of the central issues of dispute in Nucor I was the extent of Nucor's primary insurers' obligation to contribute to the payment of Nucor's defense costs in the various environmental actions that had been brought against Nucor. ( Id. ¶ 26.) In 2005, During the pendency of Nucor I, but prior to the entry of judgment, Nucor entered into settlement agreements with both Travelers and Hartford. ( Id.) The settlement between Nucor and Travelers provided that Travelers' payment to Nucor would “exhaust all coverage potentially available to Nucor under the Policies for Environmental Contamination Claims Arising out of the [WOR] Site.” (Doc. 81 ¶ 11.)

The settlement between Nucor and Hartford provided that in exchange for the payment by Hartford, Nucor “fully and forever releases and discharges Hartford from Claims ... that Nucor has or may have against Hartford with respect to ... the Nucor Policies.... Furthermore, by virtue of the foregoing releases, Hartford shall have no duty to defend or indemnify Nucor with respect to any Claim.” (Doc. 87 ¶ 9.) The Hartford settlement also stated that “[t]he Parties agree that the Settlement Sum will exhaust any and all potentially applicable limits of all Hartford Accident and Indemnity Company primary policies issued to Nucor.” ( Id. ¶ 10.)

B. The RID Action

On September 11, 2009, Nucor notified Wausau that it had received a demand letter and a draft complaint from RID alleging that Nucor was a PRP for groundwater pollution that impacted wells owned and operated by RID. ( Id. ¶ 5.) On November 2, 2009, Wausau sent a reservation of rights letter to Nucor, reserving its rights to assert possible coverage defenses as to whether the RID suit constituted a claim for “damages” for “property damages” and whether there was an “occurrence” as defined by the policies. ( Id. ¶ 7.) In the letter, Wausau also wrote that if Nucor were served with a lawsuit, it should notify Wausau “so that if appropriate [Wausau] may appoint counsel to defend Nucor's interests.” ( Id.)

RID filed its complaint in the underlying action against Nucor and other defendants in February 2010, and thereafter filed and served a First Amended Complaint in July 2010. ( Id. ¶¶ 8–9.) RID's complaint describes the nature of the action as follows:

“This is a civil action brought against the Defendants under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. §§ 9601 et seq. (“CERCLA”), for the recovery of costs incurred by RID in responding to the Defendants' release or threatened release of hazardous substances into groundwater that impacts or threatens to impact wells owned and operated by RID, as well as for damages to property owned by RID.”

( Id. ¶ 9.) On November 11, 2011, Wausau withdrew its right to deny coverage to the extent Nucor's liability arose from intentional acts or it expected or intended any property damage. ( Id. ¶ 10.)

As stated above, Nucor retained Fennemore Craig to handle its defense in the RID action. ( Id. ¶ 13.) Fennemore Craig was simultaneously retained by three other defendants to represent them in the RID action—Kinder Morgan G.P., Inc., BP West Coast Products, LLC, and BNSF Railway Company. ( Id. ¶ 14.) Wausau expressed to Nucor its concerns with Fennemore Craig's representation of multiple defendants in the RID action. ( Id. ¶ 15.)

For the period from the hiring of Fennemore Craig for the RID action through June 2011, Nucor sought from Wausau reimbursement of defense costs totaling $601,462, which included “Nucor only” attorneys' fees of $461,326, and additional fees of $140,136 representing Nucor' ‘s 25% share of additional amounts billed by Fennemore Craig for work the firm performed jointly on behalf of Nucor and the three other RID action defendants. ( Id. ¶ 17.) Wausau has to-date paid for a portion of the defense bills submitted by Nucor, but has not paid amounts it deems excessive or unreasonable, nor paid amounts for Nucor's share of...